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Wealthy investors lap up NHAI's Rs 10k cr bond issue

Issue subscribed 2.12 times on Day 1; while QIB portion was subscribed 4.07 times.

Updated: Dec 18, 2015, 10.47 AM IST
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Issue subscribed 2.12 times on Day 1; while QIB portion was subscribed 4.07 times.
Issue subscribed 2.12 times on Day 1; while QIB portion was subscribed 4.07 times.
MUMBAI: Strong appetite from wealthy and institutional investors helped the Rs. 10,000 crore tax free bond issue by National Highway Authority of India (NHAI) -the largest this financial year -sail through comfortably. The issue was subscribed 2.12 times on the first day with application money worth Rs. 21,026 crore flowing in.

Of the total issue size, Rs. 2,000 crore each was reserved for qualified institutional buyers (QIB), corporate and HNI (high net worth individual) segment with Rs. 4,000 crore reserved for retail investors who invest less than Rs. 10 lakhs.

The QIB portion was subscribed 4.07 times, the corporate and HNI portions were subscribed 3.53 times and 1.75 times, respectively.The retail portion received bids for Rs. 2,508 crore, resulting in a subscription of 0.63 times. Retail investors can continue to place bids till the issue is subscribed fully.

“Wealthy investors and institutions have lapped up NHAI bonds while retail investors were a bit hesitant to subscribe full limit as some of them are expecting higher rate in future issuances,“ said Ajay Manglunia, head of fixed income, Edelweiss Financial. “It seems that the full limit allocation in retail may get subscribed over next couple of days as all other categories are well oversubscribed“.

NHAI bonds offered tax free interest of 7.39% for 10 years and 7.60% for 15 years to retail investors. Other category of investors gets 25 basis points lower interest. Since fixed deposits from banks offering 6.75-7.5% interest pretax, rich investors find the coupons from tax free bonds attractive. As interest rates head lower, there is a chance of earning a capital appreciation in these bonds.

NHAI's issue is the fifth issue of tax free bonds in this financial year. Earlier issues of Rs. 700 crore each from NTPC, REC and PFC and 4,532 crore, were oversubscribed on day one itself. As per a Central Board of Direct Taxes circular, seven Central Public Sector Enterprises can raise Rs. 40,000 crore through issuances of tax free bonds in this financial year.

Merchant bankers expect issues from HUDCO and IREDA (Indian Renewable Energy Development Agency) in early January.

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